REF/2004/1226

THE ADJUDICATOR TO HER MAJESTY’S LAND REGISTRY
LAND REGISTRATION ACT 2002

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

BETWEEN
MICHAEL RUBINOW

Applicant
and

(1)	MISBAH UDDIN
(2)	MILENA CORBIC-BRENNAN
Respondents

Property Address: 45 Kilburn High Road and 5 Manor Mews London
Title Number NGL693698

Ann McAllister (Deputy) Adjudicator to HM Land Registry
Procession House
16 October 2006

Representation:  Michael Cronshaw instructed by Baskin Ross & Co for the Applicant; David Cook instructed by Chiltons Solicitors for the Respondents 
 ___________________________________________________________________________

DECISION
__________________________________________________________________________

Constructive trust – proprietary estoppel – whether Applicant entitled to retain caution – whether transfer from Second to First Respondent should be registered. Chief Land Registrar ordered to cancel caution and register transfer.

Introduction

1.	The Second Respondent (Milena Corbic-Brennan) is the registered freehold  proprietor  of 45 Kilburn High Road and 5 Manor Mews (the Property). By a lease dated  3 December 1991, the Applicant (Mr Rubinow) was granted a 999 year lease of the Property less the ground floor (defined as the ‘reserved property’ in the lease).  He is the registered proprietor of this leasehold interest under Title Number NGL736005.  By a sublease dated 13 March 1992 made between Mr Rubinow and Amjad Khan as lessors and Mr Rubinow as lessee, Mr Rubinow was granted a lease of 999 years less one day of the first, second, and third floors of the Property. This sublease is also registered under Title Number NGL694199. The reason for the grant of this sub-lease is not entirely clear. In any event Mr Rubinow is liable, under the headlease, to repair the Property other than the ‘reserved property.’

2.	On 23 January 2004 Milena Crobic-Brennan transferred the freehold interest in the Property to the First Respondent (Mr Uddin). On 27 July 2004 Mr Uddin applied to register the transfer. Mr Rubinow objected on the grounds that he has an equitable interest in the Property.

3.	Sometime earlier, on  4 October 2002,  Mr Rubinow had  lodged a caution against the title of the Property. In his statutory declaration in support of the caution he said this: ‘Pursuant to an oral agreement made in or around March 2000 between myself as cautioner and Milena Corbic Brennan, the registered proprietor, it was agreed between the said registered proprietor and me that an agreed proportion of the equitable interest in the above property should belong to me by virtue of a substantial monetary contribution made by me towards the development and improvement of the property and, as a result of which, I have acquired an equitable interest in the Property.’

4.	The application to register the transfer  was referred to the Adjudicator  on 3 December 2004. The case was heard on 16 October 2006. On that occasion I ordered that Milena Corbic-Brennan should be added to the proceedings as Second Respondent.

5.	The issue before me is whether Mr Rubinow has, as he claims, an equitable interest in the Property either by reason of a constructive trust or pursuant to the doctrine of proprietary estoppel. If he does not, then the application will succeed and the caution will also be removed (because there is no basis for it remaining in place against Mr Uddin’s title) If he does, then the caution remains on the title. Mr Cronshaw, who appeared for Mr Rubinow, also argued that in this event the application to register the title in the name of Mr Uddin must be cancelled since otherwise this will take priority over his equitable interest which interest would be lost. 

6.	I should also add that there is a further application to register a charge in favour of Commercial First Securities Limited. They took no part in the proceedings but their solicitors, Sternberg Reed Taylor & Gill, are aware of the referral. This application awaits the outcome of this reference.

Background 

7.	The  ground floor of the Property is  a restaurant. Milena Corbic-Brennan ran a restaurant known as Le Marseille. Mr Uuddin plans to or has opened an Indian restaurant.

8.	The first, second and third floors have been sub-divided into a number of bedsitting rooms (I believe 6) let out on assured shorthold tenancies. In April 2000 Mr Rubinow began to carry out works to the roof, upper floors and basement. The works were both to the exterior and to the interior. Each bed sitting room was to have its own bathroom. I have seen a receipt dated 23 September 2000 from L&R Construction totalling £88,700 (although no breakdown is given) and a bundle of receipts attached to his statutory declaration dated 11 May 2004. These total just under £14,000 and are, it is said, additional to the former figure.

9.	The receipt is accompanied by a letter from Design-Tect, architects, which states that the writer believed that the owner of the restaurant had agreed to sell the restaurant to Mr Rubinow. The works themselves are broken down into five groups. No claim is being made in respect of the works to the roof (since these were simply carried out to comply with the repairing covenant).

10.	The other works relate to a) the erection of scaffolding front and rear b) works carried out to the front of the premises c) works carried out to the rear and d) works carried out to the restaurant.  Not all of these works relate to the ground floor premises. In the course of evidence it was established that the works referable to the ground floor were these: replacing the fascia outside the restaurant with a new shopfront, carrying out some rendering, some new pipework and replacing the fire alarm system. In addition, in so far as the works done to the exterior (for example the roof) went beyond repair and were an improvement, then it is said that these were also for the benefit of the freeholder. There was, in fact, no  evidence on this point.

11.	Milena Corbic Brennan began proceedings in the Central London County Court on 24 November 2000 for an order that the scaffolding be removed. The application (made without notice)  was supported by a witness statement setting out the disruption caused to her business by the scaffolding and works generally. She went on to say that there was no evidence of re-pointing or any other need for the scaffolding.

12.	Mr Rubinow’s witness statement is dated 29 November 2000.  There is no reference in this statement to any agreement that Mr Rubinow would either be entitled to purchase the freehold (either at a discount or at all) or that, by virtue of the works done, he had acquired an interest in the freehold. He refers to a conversation with Milena Brennan in which he says that he informed her of the scaffolding and hoped that it would not inconvenience her too much.

13.	On 30 November Mr Rubinow gave an undertaking to remove the scaffolding by 6 December 2000 and to require his workmen to stop throwing rubbish and material from the roof. He also agreed to pay costs. His explanation as to why he had made no mention of the agreement reached with Milena Corbic-Brennan was that he was in shock and the sole issue at that time  was the removal of the scaffolding.

14.	Mr Rubinow also made a statutory declaration on 11 May 2004 in opposition to Mr Uddin’s application to register the Property in his name. In this document he gives details of the oral agreement which he says took place in March 2000. It was agreed, he says, that he would carry out works to the exterior of the building which would result in an ‘agreed proportion’ of the equitable interest in the freehold belonging to him. There is no definition of the ‘agreed proportion.’ The declaration then asserts that he has the benefit of a constructive trust.

15.	When I asked Mr Rubinow what this proportion was intended to be, he answered that this terminology (to use his term) was not exactly how he would put it: the agreement was that he would be able to buy the Property at a discount but  could not  say whether any percentage had been agreed.  

16.	I should at this point take a step back in the  narrative.  On 29 August  2002 Milena Corbic Brennan served a notice under section 5 of the Landlord and Tenant Act 1987 on Mr Rubinow offering to sell the freehold of the Property to him for £280,000, broken down as follows: £250,000 for the freehold and £30,000 for chattels.

17.	An issue arose as to whether this notice was valid (by reason of the reference to chattels) but without prejudice to this, Mr Rubinow sent a letter on 1 November 2002 accepting the offer.

18.	On 4 December 2002 the solicitors then acting for Milena Corbic-Brennan, Otchere Collinson, sent  a draft contract. The purchase price was given as £270,000. On 19 December the same solicitors informed Baskin Ross & Co (who have acted throughout for Mr Rubinow) that another contract had been sent out to a third party. Baskin Ross responded by saying that the period for acceptance of the offer had not expired, and would not do so until 1 January 2003.  Correspondence continued on the point. On 23 February 2003 Baskin Ross & Co wrote saying that Mr Rubinow would be able to exchange contracts during the course of the next week.  On 11 March they said that they had received a cheque for £27,000 by way of deposit.  On 12 May 2003 Otchere Collinson stated that the asking price for the contract was £280,000. 

19.	On 23 May 2003 Otchere Collinson sent Baskin Ross & Co a sales schedule showing that the Property had been sold for £300,000. The agent dealing with the matter was Mr Uddin. 

20.	The negotiations did not end there. Baskin Ross & Co wrote again on 21 July 2003 offering £265,000 for an immediate exchange and completion. Nothing came of this. On  23 January 2004 the Property was sold to Mr Uddin. The purchase price was  £400,000.

21.	Milena Corbic-Brennan states, and I accept, that she had not known of the caution until a search of the register was carried out on 4 December 2003. This formed the subject of some correspondence in the early part of 2003. On 16 March 2004 Baskin Ross & Co intimated their client might bring proceedings for breach of covenants in the lease and for non compliance with the provisions in the Landlord and Tenant Act 1987. Again, I note that no reference is made in this letter to any claim to an equitable interest in the Property.

22.	At no point, in other words,  did Mr Rubinow or his solicitors repeat the assertion, first made in the statutory declaration in support of the caution, that he had acquired a beneficial interest in the Property, nor did they argue, in correspondence, that the purchase price should be reduced to reflect any such agreement. 

Evidence

23.	I have already dealt with part of the written evidence submitted by Mr Rubinow and part of his evidence given orally.  It is to be noted that in the statutory declaration accompanying the caution, his statutory declaration dated 11 May 2004 (to which I have already referred) and in a further witness statement sworn shortly before the hearing, he puts his case on the basis that an agreed (but unspecified) portion of the equitable interest in the freehold was to belong to him as a result of the works carried out by him in 2000.

24.	In his statement of case (dated 27 April 2005) he put his case on a different basis, namely that he would be reimbursed on the sale of the freehold for the whole of the sums expended on the renovations. In the same document he says that there was a common intention that the Property was to be held in shares which reflected the expenditure. His architect says that he believes that there was an agreement to sell the freehold to him.

25.	In evidence Mr Rubinow explained that initially he was just going to do repairs (there was, for instance, a leak into the basement). The scope of the works then expanded (partly because of the need to put a second entrance to the basement in order for it to be lettable).

26.	Mr Rubinow said he  had a number of discussions with Milena Corbic-Brennan. He understood that the property was to be his. It would be sold to him at a price which reflected the works. But no price was fixed: they were negotiating.  The figure of £280,000 was in fact mentioned (and indeed at one point was, Mr Rubinow said, agreed)  before the Landlord and Tenant Act notice was served, but Mr Rubinow thought £260,000 was a fairer figure (and according to him was also mentioned). He accepted the offer of £280,000 but in the end could not find the money even for the lower figure of 270,000.

27.	As I have already mentioned, he was not able to say what proportion of the sums expended related to the ground floor but he stressed that the works as a whole went beyond what was needed simply to put the Property in repair. He also said that the value of the Property was more than £280,000. At the beginning of 2003 he assessed the value at £350,000.

28.	John Daniel also gave evidence. He had carried out work to the Property on Mr Rubinow’s instructions. His witness statement was to the effect that he had overhead conversations between Mr Rubinow and Milena Corbic-Brennan that he, Mr Rubinow, would be entitled to a share of the proceeds of sale of the freehold as a result of the works carried out by him. In evidence he said he believed that the agreement was that ‘Michael would have some financial gain’ from the works. I don’t doubt that Mr Daniel was doing his best to recollect conversation which had taken place some time ago, but in the end I found his evidence of little assistance. 

29.	Milena Corbic-Brennan denies that there was jany agreement that Mr Rubinow would be entitled to any interest in the freehold by reason of the work or any other commercial agreement between them arising from the works. She was clear that she did not want to enter into a business relationship with him and did not take him seriously. He never showed her any plans or discussed a budget. Her primary concern was to run her restaurant business with minimum disruption. I think it right to say that she had some plans to sell the freehold (indeed that is borne out by the events which happened) but I accept fully that she never agreed that Mr Rubinow should have any share of the freehold (or be entitled to purchase at a discount) and I also accept that she did not act in any way or make any representation upon which he relied in carrying out the works. Where her evidence differs from that of Mr Rubinow, I have no hesitation in preferring her evidence.

30.	Asked about the figure of £280,000 she said this came from an estate agent. In the event Mr Uddin was willing to pay considerably more. She did not accept  that the difference in price is to be explained by reference to the increase in value due to the works.

31.	I found Mr Rubinow’s evidence confusing and evasive. Whilst I fully accept that it is not necessary, for the purpose of creating a constructive trust (or for the purpose of the doctrine of proprietary estoppel) that there should be the same degree of certainty as is necessary for the creation of a contract, it is nonetheless incumbent on the party seeking to invoke a trust to establish, on a balance of probabilities, by evidence or by inference, that there was some actual agreement or common intention that he should have a beneficial interest in the land. There must, in short, be some consensus as to beneficial title.

32.	In this case there is a central ambiguity at the core of Mr Rubinow’s evidence. It is not clear whether he says that he was to be entitled to a share in the beneficial interest without more or whether he was to be entitled to a reduction in the purchase price. The true nature of the bargain needs to be clearly established. An agreement which is predicated on a sale at a discount is not the same (or at least not necessarily the same)  as an agreement to have a beneficial interest in the Property.   

33.	To make good a claim based on proprietary estoppel Mr Rubinow needs to be able to identify the representation or assurance of rights he says led him to act to his detriment. In my judgment he is not able to do so.  It is highly significant that no mention of any agreement (or any entitlement to buy at a discount) was made at any stage, either at the time of the County Court proceedings or (as one would expect) during the course of negotiations.

34.	The lodging of the caution, I suspect, was simply designed to give Mr Rubinow a bargaining counter in the event that a sale to someone else was to take place. I suspect too that he nurtured hopes that he would be able to purchase at a reduced rate, and may have done the (relatively minor) works to the ground floor for that reason. But the works done to the Property were in the main either pursuant to his contractual obligations or for his benefit. On any footing they cannot be put forward as the reason for the difference in price between £280,000 and £400,000. I accept that this difference was due (largely if not exclusively)  both to an increase in value of the Property and the existence of a purchaser willing to pay this amount.  

35.	It seems to me that the position is put beyond argument when one looks at the negotiations to purchase. Mr Rubinow’s  evidence was that there had been discussions for the sale of the property at £280,000. He was offered the property at that price. At one point Milena Corbic-Brennan reduced the price to £270,000 and Mr Rubinow increased his offer to £265,000. He was not in a position to exchange contracts, even though negotiations continued  for some 9 months. If his case is put on the basis that he was entitled to a reduction in the purchase price (and that £280,000 or thereabouts  reflected this reduction and his corresponding beneficial interest) then the reason – and the sole reason – for his failure to acquire the freehold was because he simply did not have the necessary funds. 

Conclusion

36.	For all the reasons given above I will order the Chief Land Registrar to give effect to the application dated 27 July 2004 to register the transfer of the freehold interest in the Property from Milena Corbic-Brennan to Mr Uddin and to cancel the caution registered on 8 October 2002.

37.	As to costs, my provisional view is that costs should follow the event. If, therefore, the Respondents wish to make an application for costs they must do so by 8 December 2006, providing a schedule.  The Applicant will then have until the 22 December 2006 to make such representations or objections as he deems fit, and I will consider the matter on paper.

BY ORDER OF THE DEPUTY ADJUDICATOR

ANN McALLISTER

Dated this 20th day of November 2006